Leidos (LDOS) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 adjusted EBITDA margin of 13.5% and strong organic revenue growth, with non-GAAP diluted EPS up 46% and net income up 54% year-over-year.

• Raised full-year guidance for the second consecutive quarter, reflecting robust business development, operational execution, and strong Health & Civil segment growth.

• Strategic focus on operational improvement, strategy development, acquisition integration, and investments in AI, cybersecurity, and quantum technologies.

• Backlog reached $36.5 billion, with net bookings of $4.0 billion in Q2 and 86% of revenue from U.S. government contracts.

• Business realigned into four reportable segments effective 2024: National Security and Digital, Health & Civil, Commercial & International, and Defense Systems.

Financial highlights

• Q2 revenues were $4.13 billion, up 7.7% year-over-year; net income was $324 million, up 54%; adjusted EBITDA was $559 million (13.5% margin), up 33%.

• Non-GAAP diluted EPS was $2.63, up 46% year-over-year; operating income increased 43.5% to $475 million.

• Generated $374 million in operating cash flow and $351 million in free cash flow; DSO improved to 58 days.

• Ended Q2 with $823 million in cash and $4.7 billion in debt; leverage ratio at 2.0x–2.4x.

• Paid $51 million in dividends and repurchased $114 million in shares in Q2.

Outlook and guidance

• FY24 revenue guidance raised to $16.1–$16.4 billion; adjusted EBITDA margin expected at approximately 12%.

• Non-GAAP diluted EPS guidance increased to $8.60–$9.00; operating cash flow guidance remains at ~$1.3 billion.

• Expect Commercial & International margins to recover in H2; National Security and Digital margins to moderate.

• Guidance reflects strong first half, positive outlook, and some moderation in VBA disability exam business due to VA budget constraints.

• Management expects to meet liquidity needs over the next 12 months through operations, cash balances, and available credit.